Buying new vs. established

It’s the age-old question - Do you buy an established or brand new property for investment purposes? There are always pros and cons to both but in this blog we will outline the benefits to buying new vs. buying established.

We have whittled it down to three of the biggest factors to consider when buying your next investment property. Its important to note there are more then these three but these points hold the greatest influence.

Depreciation – When you buy a new property for investment purposes you can maximize the depreciation benefits, which in short means more savings to you, the investor. What is depreciation? It’s reduction in the value of an asset over time, due in particular to wear and tear. The Australian Tax Office (ATO) has a policy that allows you to claim ‘depreciation’ benefits. This process is completed annually and this tax refund helps with any potential replacement or maintenance issues that may come up.

Maintenance – On the topic of maintenance. This is where a new property construction has its biggest advantage. All items within the investment property are new and subsequently less likely to falter and put you out of pocket due to the ensuing repairs. Also, the insurances that comes with all the products gives you peace of mind as you move forward. Nothing would be worse then purchasing a property and two weeks later the hot water system decides to no longer work. It would be a costly exercise to replace.

Higher rents – This rule of thumb has proven it's self time and time again in our industry but it must be said it can depend on your location. Generally speaking, a new property will fetch a higher rent due to its appeal of new appliances and no wear and tear.

Investing in property can be a daunting process and as such it is always prudent to make it as stress free as possible. Established properties are a solid investment option and should not be dismissed entirely. Everyone person’s circumstances are different and it is recommended you seek professional advice before embarking on your property investment journey.

The terms ‘positive’ and ‘negative gearing’ have been the topic of the country for the last few weeks and will continue to be leading into the election in early July. The effects of these strategies on our economy are being hotly debated right now and the average Australians who use these strategies on a day to day basis are eagerly awaiting clarification on the policy.

So what is the fuss about? Well let’s quickly recap the different types of gearing.

Nearly every week in the news there is a story on buying your first home. TV segments and articles with headlines like “It’s impossible for Gen Y to afford to buy their own home and always will be” or “Stop your whining, I have bought a property! Let me tell you how.”

So what is the real story behind these bulletins?

The reality is buying your first home won’t be easy, as the first major hurdle is saving the deposit.

When it comes to investing in property, choosing your location is always first on the agenda. Highlighting the key drivers of the region are critical to the long-term success of the property and spending the time doing the research will pay dividends.

Where do you start?

When looking for a strong candidate always keep an eye on the following:

My morning coffee inspired today’s topic, so lets get into it. When you set out to evaluate your competition it’s hard not to be drawn to the people/businesses that are doing it so wrong. “I got rich by these 3 simple steps. Download my ebook for $$”. If making money was easy, everyone would be rich! Simple? It is hard work. ‘Work’ being the key word.

As an investor you need to be grounded in reality and understand that realising the full potential of an investment will take time. Some don’t, most do.

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Hometree is a group of companies based on the Sunshine Coast in Queensland, Australia. We facilitate high quality advice and strategic guidance for entry level and experienced investors, Australia-wide.
All the information and numbers stated on the Hometree website are not to be considered for actual financial planning, finance or property advice. They are simply used for example purposes only. Please contact us if you would like some personalised advice for your own financial situation.